ResidentialArad Domestic – High standard Multi Jet, Volumetric and Single Jet water meters for domestic applications. And ARAD Waterworks – Collection of top quality bulk water meters designed for use in waterworks networks and industrial application

Bulk metersArad Domestic – High standard Multi Jet, Volumetric and Single Jet water meters for domestic applications. And ARAD Waterworks – Collection of top quality bulk water meters designed for use in waterworks networks and industrial application

AMR/AMIThe DIALOG 3G is an advanced wireless AMR/AMI system combined with powerful control and management software tools. The system is based on cutting edge technologies developed from unique patents and vast experience in the field. The DIALOG 3G is a recognized market leader whose system has been installed at utilities in hundreds of cities around the world. The system provides a diverse solution suited to the unique needs of Utilities, with our R&D teams continually working to provide new solutions for this fast developing market.

Blog

Water Industry Consolidation: Is It a Trend?

September 8, 2016

Xylem Acquires Sensus

The internet is buzzing with the news of Xylem’s recently announced intention to acquire Sensus by the end of this year for $1.7 billion in cash.

Xylem (NYSE:XYL) was spun off from ITT Corporation in 2011 and today is a leading end-to-end water and wastewater technology provider with operations in more than 150 countries. Their solutions cover every stage of the water cycle – transportation, treatment, testing — and are used by public utilities, residential and commercial buildings, and in industrial and agricultural settings. Last year Xylem had revenue of $3.7 billion and ~12,700 employees worldwide.[1] [2] It’s market cap (as of August 25) is $9 billion.

Sensus is a global player in the AMI and smart metering market. More than 80 million of its smart meters are deployed in the gas, electric and water industries,[3] with water accounting for about 75% of its revenues[4]. Its distinctive FlexNet® communications network technology uses licensed spectrum in the US and other geographies to provide secure connectivity solutions for multiple applications.[5] Sensus, which is owned by investment funds affiliated with Jordan Co. and GS Capital Partners 2000 LP, generated $837 million in revenue in its last fiscal year (ending March 31 2016). It has ~3,300 employees at major locations in the US, the UK, Germany, Slovakia and China.[3]

Why the Xylem-Sensus Deal is Strategic

The deal is strategic for the companies themselves for a number of reasons:

They complement each other geographically, with the US accounting for 67% of Sensus’ revenue vs. only 41% for Xylem.[3]

Sensus will be a strong growth engine for Xylem. It is well-positioned in the fast-growing global AMI market, which Markets and Markets projects will grow from $10 billion in 2015 to $19.5 billion in 2020.[4]

It will boost Xylem’s smart meter, network technologies and data analytics services for the water industry, and move Xylem into the electric and gas sector as well.[4]

In short, as Patrick Decker, Xylem President and Chief Executive Officer writes “This [deal] will be an important milestone in our strategy to move Xylem’s portfolio of solutions up the technology curve. The combination of Xylem’s world-class brands and products with Sensus’ leading-edge smart technologies will create a differentiated offering that will better meet our customers’ evolving needs, including greater energy efficiency, water conservation, and improved life-cycle costs.”[5]

Frost & Sullivan senior industry analyst Seth Cutler notes that the combined capabilities of both companies allows them to pursue what he considers to be a game-changing strategy of approaching smart cities at the customer-level “…especially if communications networks become consolidated. Sensus’ FlexNet platform could support other communications needs of cities as infrastructure becomes more interconnected, and this would avoid unnecessary platform duplication.”[4] (our emphasis)

Another Example of a Consolidation Trend

In May of this year leading consumer electronics company Belkin announced a joint venture with Uponor, an international systems and solutions provider for safe drinking water delivery, energy-efficient radiant heating and cooling and reliable infrastructure. The joint venture, Phyn LLC, will provide an intelligent water solution that protects families and their homes from leak damage, enables conservation and optimizes household water usage. Belkin will be the majority owner, with Uponor investing $15 million for 37.5% of the new company.

So here we have a consumer electronics retailer with expertise in IoT and in water sensing technologies joining forces with a wholesale distributor of plumbing solutions with the declared intention, as stated by Belkin founder and CEO Chet Pipkin of “…bringing water up to speed with the rest of the smart home, helping not only to protect consumers’ homes and wallets, but also do our part to solve the very real challenges facing our global water supply.”[6] (our emphasis)

In other words, the consolidation of Belkin’s and Uponor’s capabilities into a single new company allows them to strategically address the smart home market with a sophisticated water solution.

So Is It a Trend?

It’s too early to say. But Seth Cutler of Frost & Sullivan points to at least two other examples that, in his eyes, are further indicators that the highly interconnected water and the energy sectors (see our blog Where Water and Energy (Should) Meet) are consolidating in order to strategically address their markets with integrated solutions: Honeywell acquiring Elster Metering for $5 billion; and Veolia’s integrated urban services, including water and wastewater management, waste and recycling services and waste-to-energy.